When Firms in a Price-Taker Market Are Temporarily Able to Charge

question 112

Multiple Choice

When firms in a price-taker market are temporarily able to charge prices that exceed their production costs,

• A) the firms will earn long-run economic profit.
• B) additional firms will be attracted into the market until price falls to the level of per-unit production cost.
• C) the firms will earn short-run economic profits that will be offset by long-run economic losses.
• D) the existing firms must be colluding or rigging the market, otherwise, they would be unable to charge such high prices.

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Definitions:

Punitive Damages

Financial compensation awarded to a plaintiff beyond actual damages to punish the defendant for egregious behavior.

Legal Malpractice Insurance

Insurance that provides coverage to attorneys and law firms for claims made against them by clients and third parties for negligence and errors in the provision of legal services.

Intentional Acts

Actions performed with the understanding and desire to bring about a specific result.

Malpractice Claim

A lawsuit brought against a professional (e.g., a doctor, lawyer) for harm caused due to their negligence or failure to meet the standards of their profession.